July 4, 2022

Why Crime Could Kill Crypto

The strongest argument against cryptocurrencies used to be that they had yet to show they were much good for anything. Now the strongest argument against them may be that they have become far too good at one thing: enabling crime.

Not long after the first of the private digital currencies, bitcoin, launched in 2009, crooks recognized its appeal. While law enforcement is proving increasingly adept at tracking bitcoin transactions and at times seizing ill-gotten money, the ability to make digital payments without financial intermediaries has facilitated activities such as the selling of illegal goods and services online and money laundering. In a 2019 paper, researchers Sean Foley, Jonathan Karlsen and Tālis Putniņš estimated that 46% of bitcoin transactions conducted between January 2009 and April 2017 were for illegal activity.

Speculative trading has since taken up an ever rising share of transactions, but a spate of recent ransomware attacks, where cybercriminals lock up a victim network’s files and demand payment for their release, most often in bitcoin, has raised the threat level on digital currencies’ crime problem. An attack last month on Colonial Pipeline Co. shut down a critical East Coast gasoline pipeline; another, on

JBS SA,

halted operations earlier this month at some of the largest meat plants in the U.S.

More than just money is at stake. When organizations such as hospitals are attacked, lives can be on the line. In a recent interview with The Wall Street Journal, Federal Bureau of Investigation Director

Christopher Wray

compared the difficulties posed by the recent spate of ransomware with the challenge posed by the Sept. 11, 2001, terrorist attacks.

One problem for law enforcement is that, even when the cybercriminals behind them can be identified, thefts that once would have required exchanges of bags of money or suitcases of gold to pull off can now happen entirely in countries where the U.S. has no extradition treaty. The FBI was able to seize a portion of cryptocurrency that Colonial Pipeline paid to ransomware gang DarkSide but, because the gang is believed to operate in Russia, its members might be beyond reach.

Another is that there is no easy way to beef up digital security to the point that hackers can simply be kept out of data vaults; the information protection systems we rely upon are too complex, and too pockmarked with vulnerabilities, for that.

Making it harder for cybercriminals to receive cryptocurrency payments, and thereby reducing the financial incentives for ransomware attacks, might help. Here, Mr. Wray’s comparison with Sept. 11 is telling. Following the attacks, the 2001 Patriot Act introduced an array of tougher provisions to the 1970 Bank Secrecy Act aimed at disrupting the financing of terror networks.

A blunt way to stem the problem would be to widely ban payment or trading in cryptocurrencies, as authorities in China have sought to do. But given the now-substantial financial stakes in them—cryptocurrencies have a combined value of $1.6 trillion, according to coinmarketcap.com—it is hard to imagine there being the U.S. political will to do that. At least not as a first step.

Ransomware attacks are increasing in frequency, victim losses are skyrocketing, and hackers are shifting their targets. WSJ’s Dustin Volz explains why these attacks are on the rise and what the U.S. can do to fight them. Photo illustration: Laura Kammermann

But there are other steps U.S. authorities could take, and these might also diminish the viability of the use of crypto in commerce, or at least raise the cost of using it.

One approach might be to make it harder to use or transfer cryptocurrency once stolen, much like suitcases filled with $1 million in cash are difficult to actually spend without getting noticed. The Biden administration is proposing to adopt the same requirement for crypto that all businesses have when they are paid more than $10,000 in cash—reporting it to the Internal Revenue Service.

Governments also could ratchet up monitoring responsibilities. A number of measures are already under consideration. Citing in part “national security imperatives,” the U.S. Treasury Department last year proposed additional vetting for cryptocurrency transfers to so-called “unhosted wallets” that aren’t associated with a bank or other regulated financial intermediary. The Financial Action Task Force, a global standard-setter for combating money-laundering, recently proposed new guidelines for expanding security requirements to a much wider range of crypto entities.

Such measures could make a segment of crypto transactions even beyond bitcoin a little less anonymous and decentralized—a prospect that many advocates would be loath to see. Increased regulations could also make legitimate transactions more onerous, reducing cryptocurrencies’ appeal.

But the biggest risk to cryptocurrencies may be that such regulatory efforts won’t be effective in curtailing the dangerous acts cryptocurrencies have helped enable.

In that case, the crimes might only become more heinous and severe restrictions on the use of cryptocurrencies more politically palatable.

Write to Justin Lahart at [email protected] and Telis Demos at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Related Posts

Black Market Undercuts Green Targets for Air Conditioners, Refrigerators in Europe

June 4, 2021

June 4, 2021

BRUSSELS—U.S. corporate giants are being hit so hard by a European smuggling wave that even the White House has weighed...

As Amazon, McDonald’s Raise Wages, Small Businesses Struggle to Keep Up

May 20, 2021

May 20, 2021

Ben Johnson is looking for a data analyst and a data scientist to come work for his Philadelphia-area consulting firm....

Bosses Still Aren’t Sure Remote Workers Have ‘Hustle’

May 23, 2021

May 23, 2021

More than a year into America’s great work-from-home experiment, many companies have hailed it largely as a success. So why...

Amazon and Other Tech Giants Race to Buy Up Renewable Energy

June 23, 2021

June 23, 2021

The race to secure electricity deals for power-hungry data centers has tech companies reshaping the renewable-energy market and grappling with...

Meat Supplies Tighten as Cyberattack on JBS Snarls Food Chain

June 2, 2021

June 2, 2021

A ransomware attack against JBS SA JBSAY -0.33% sent shock waves throughout the U.S. food industry and exacerbated tension between...

U.S. Job Openings Reached Record Level This Spring

June 8, 2021

June 8, 2021

Available jobs in the U.S. climbed further above pre-pandemic levels last month following a record surge earlier in the spring,...

Oil Giants Are Dealt Major Defeats on Climate-Change as Pressures Intensify

May 26, 2021

May 26, 2021

Exxon XOM 1.17% Mobil Corp. and Royal Dutch Shell RDS.A 0.38% PLC suffered significant defeats Wednesday as environmental groups and...

The Fine Print of Dietary Supplements

June 25, 2021

June 25, 2021

Thanks in part to the Covid-19 pandemic, dietary supplements are more popular than ever. Three out of four Americans—including one...

Corporate America and Hollywood: A Love Story

May 29, 2021

May 29, 2021

The tech giants stormed Hollywood this past week: Amazon.com Inc. announced its plan to buy the storied MGM studio for...

Neymar Challenges Nike Over Split

May 28, 2021

May 28, 2021

Soccer superstar Neymar lashed out at Nike Inc. on Friday, questioning how the company handled a Nike employee’s allegation of...

Fed Inching Toward Discussion of Slowing Bond Purchases

June 4, 2021

June 4, 2021

WASHINGTON—Friday’s jobs report keeps the Federal Reserve on track to begin informal internal discussions about reducing the pace of its...

Global Chip Shortage ‘Is Far From Over’ as Wait Times Get Longer

October 29, 2021

October 29, 2021

Almost a year into a global chip shortage, the problems are increasing for many customers as delays get even longer...

Subway’s New Tech Chief Eyes Mobile Customer Experience

May 24, 2021

May 24, 2021

Subway is looking to rewire its mobile-ordering technology and processes to improve customer experience amid a surge of digital sales,...

Tech Spending Expected to Rise as Pandemic Restrictions Ease, Economy Improves

June 30, 2021

June 30, 2021

Liberty Mutual Group Chief Information Officer James McGlennon plans to spend more this year on the software and tools behind...

Amazon Primed Andy Jassy to Be CEO. Can He Keep What Jeff Bezos Built?

July 2, 2021

July 2, 2021

One of the signature traits of Andy Jassy’s leadership of Amazon.com Inc.’s cloud-computing unit was a meeting tool called “the...